Manufacturing will stay in the UK, where Newall employs about 100 people at its Leicester plant. Newall is a profitable business, with annual sales of around £6.5m. It exports about 85% of its output, mainly to customers in the machine tool and process markets. BEI, whose sales last year amounted to around £115m, expects Newall to be making a positive contribution to its business by the end of the 2005 fiscal year.

"We are excited about this acquisition," says BEI chief executive Charles Crocker, "because we believe the addition of DRO and digital linear encoder products will be a natural extension of BEI`s product portfolio".

Derek Rimmer, Newall`s managing director, believes that the two companies technologies are complementary, adding that BEI`s involvement in the automation, aerospace and automotive sectors, "will provide opportunities for us to extend the markets for Newall`s unique encoder technologies".

Newall was founded in Peterborough in 1968 and, in 1973, developed its Spherosyn linear encoder technology (shown above) which operates on an inductive basis, instead of the optical technology used by most of its rivals. It has no bearings, springs or internal moving parts, and is sealed against contamination.

Earlier this year, the Japanese CNC giant Fanuc allowed Newall to offer its proprietary absolute encoder serial interface. The only other encoder supplier to be granted this right has been Heidenhain.

• BEI has signed an agreement to licence the non-contact torque measurement technology developed by the German company, NCT Engineeering. The licence covers sales in America and Japan. BEI has also invested about $2m in NCTE to take a 6% stake in the company.